What Military Service Could Teach MBAs

April 9, 2014 Editor 0

In 1980, almost 60% of large, public companies in America were headed up by a male military veteran. By 2006, a mere 6.2% of these businesses had a CEO with military experience.

These numbers, from a January National Bureau of Economic Research working paper by Efraim Benmelech and Carola Frydman, aren’t necessarily surprising. As the duo explained to me over email, “the decline in military CEOs is a reflection of broader trends in the U.S. population.” Indeed, by the end of World War II, U.S. military personnel numbered at more than 12 million, and the decline in military size since Vietnam is almost as dramatic as the above chart.

Using Forbes 800 and Execucomp surveys that identify company CEOs, and aided by additional research into military service, age, and education, Benmelech and Frydman were able to compare firms run by veterans and those run by executives without any military experience. Then they asked a question: “Has the disappearance of executives who served in the military from the C-suite had a real impact on corporate America?”

The answer, in short, is: Yes.

“Military CEOs seem to cope better under pressure, which is important for firms that experience distress, or for firms that operate in industries that are in distress,” the authors told me. “This seems to stem from military training and experience in difficult situations.”

In addition, “military CEOs are also more conservative in making investments and are much less likely to be involved in financial fraud.”

Importantly, these CEOs only served for a few years on average — they “either enlisted or were drafted into some of the major wars of the 20th century and left the military when these conflicts ended.” So there’s evidence that even a short, sometimes involuntary stint can make a big impact.

Further, the researchers found that, while some military CEOs also held MBAs, this fact didn’t have much to do with their tendency to avoid fraud or act conservatively about investments. “This suggests that whatever traits or experiences obtained during military service that shape the actions of CEOs are not being provided by MBA programs.” And it didn’t matter what type of military service it was — there were no statistical differences between CEOs who were in different branches of the military or the reserves.

To be clear, not all non-veteran CEOs  and their military counterparts behave differently, and we know that being conservative about investments like R&D can sometimes backfire. But given these newly-identified characteristics of military CEOs and their significant drop-off since 1980 (not to mention a coming reduction in Army size, for better or worse), it’s worth pausing to consider what current and future business leaders might be missing out on — and how to fill that gap. “We need to better define what aspects of leadership are unique to veteran CEOs, and then we need to think about how to incorporate those into business education,” say Benmelech and Frydman.

“In general, it seems like a good idea to highlight ethics and leadership even more.”

Go to Source

Categories: HBR, Insights

Tags: Master of Business Administration, Military education and training